Dunn v Shapowloff

(1978) 2 NSWLR 235

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(Judgment by: Mahoney)

Dunn v Shapowloff

Court:

Judges: Reynolds
Glass

Mahoney

Legislative References:
Companies Act 1961 - s. 303 (3)
Justices Act 1902 - s. 112 (5)

Judgment date: 19 October 1978

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Judgment by:
Mahoney

MAHONEY J.A. On 5th February, 1970, the defendant, Mr. Shapowloff, was an officer of Stirling Henry Ltd. ("the company") and was knowingly a party to the transaction here in question. In particular, on that date, he personally instructed the company's brokers, Donovan & Co., to purchase on the Stock Exchange 5,000 shares in Tasminex N.L. The shares were purchased at a total cost of $131,350.50. The company subsequently went into liquidation. Mr. Shapowloff has been charged, in relation to that transaction, with an offence under s. 303 (3) of the Companies Act, 1961 . That section has now been repealed, and this subsection has been replaced by s. 374AC of the Act. Nothing has been argued to turn upon this legislative alteration.

The proceedings were brought in a court of Petty Sessions and Mr. Shapowloff was convicted. An application was made to this Court by Mr. Shapowloff in reliance upon s. 112 of the Justices Act, 1902 , and Cantor J. ordered that the conviction be set aside and the summons dismissed. The plaintiff, the informant in the Court of Petty Sessions, has appealed to this Court against his Honour's order.

Having regard to the manner in which the matter has been presented, before Cantor J. and in this Court, two main questions arise:

(1)

whether the learned magistrate acted upon a proper construction of s. 303 (3); and

(2)

whether, if he did, there was an error appropriate for correction under s. 112 of the Justices Act .

As to (1): The construction of s. 303 (3):

Mr. Shapowloff was represented by counsel before the magistrate and before Cantor J. Before this Court he appeared in person. The matters of substance which require consideration by this Court are as follows:

(a)

was there a "contracting of a debt"?;

(b)

was the debt "a debt provable in the winding up"?;

(c)

on what basis is the relevant ground of expectation to be assessed?;

(d)

what is the effect of the imposition of an excessive penalty?

As to (a): The subsection operates only if there has been "the contracting of a debt". Mr. Shapowloff submits that that event did not take place.

The order placed with the company's brokers envisaged that the brokers would buy the Tasminex shares on the Stock Exchange. This would involve them entering into agreements with brokers for a seller or sellers. No doubt the company's brokers would incur obligations to the selling brokers: cf. Jones v. Canavan ^[F7] ; Utz v. Javor ^[F8] , but the debt here in question is a debt between the company and its brokers. It has been accepted that any such debt would fall due for payment on, or at a time calculated by reference to, the tender of the scrip for the shares. The actual delivery of the scrip was not proved.

Mr. Shapowloff based two submissions on the fact that delivery of the scrip was not proved: that there was nothing "contracted"; and that, if there was, that which was contracted was not a debt. A contractual relationship came into existence when the order was placed with, and accepted by, the company's brokers or, at the least, when the order was fulfilled. It was a term of that relationship that the company would pay the purchase price of the shares, though not until the tender of the scrip. But, as I understand it, Mr. Shapowloff's point in this regard is that the proper inference to be drawn, when the magistrate considered the matter in February 1975, was that the scrip had never been delivered and that, therefore, such contractual relationship as had existed with the company's brokers, had ceased to exist. Therefore, the argument would run, there was no contracting of a debt.

I do not think that that argument should be accepted. As the result of the contractual relationship, and the purchase of the shares on the Stock Exchange, the company became liable to pay a liquidated sum, albeit upon a contingency, viz., the tender of the scrip. I do not think the fact, if it be the fact, that the contract was never completed by tender or payment means that there was not, initially, a contracting of the debt. The fact that, e.g., the company's obligations, as to payment or otherwise, are contingent, does not, in my opinion, alter the position. If this be so, then the fact that, as the result of the contingency or otherwise, the debt never falls due for payment, does not mean that there was no contracting of it. For example, the fact that, following the contracting of a debt by a company, the contract came to an end, because the commencement of its winding up prevented the property being tendered, or otherwise the conditions being fulfilled, would not, in my opinion, have been a fact intended by the legislature to render the subsection inapplicable; I think the intention was to the contrary.

Nor do I think that "debt" was otherwise than a debt within s. 303 I see no reason why the contracting of a contingent debt should not be within the mischief dealt with by the subsection. Nor should the fact that, following the contracting of the debt, the company ceases, for whatever reason, to be liable to pay it.

As to (b):

It was submitted that, if there was a debt, it was not one which was provable in the winding up. In my opinion, the prosecution's case does not depend upon the debt having been actually proved, or upon it being established that there were in fact available the technical proofs necessary to prove it. The subsection looks to the nature or quality of the debt and to whether it is of its nature provable in "the" winding up, i.e., the particular winding up: Shapowloff v. Dunn ^[F9] I do not think the fact, if it be the fact, that the non-delivery of the scrip meant that, in the event, the company's brokers could not prove for their debt in the winding up, affected the nature of the debt for this purpose. Once it appears that the debt contracted, though contingent, was of its nature provable in the winding up, the fact that, because of the non-fulfilment of conditions, the debt ceased to be payable, does not prevent successful prosecution.

As to (c):

For the offence to be proved, it must appear that the officer had "noreasonable or probable ground of expectation, after taking into consideration the other liabilities, if any, of the company at the time, of the company being able to pay the debt". The subsection refers not merely to expectation, but to a ground of expectation. This is of significance, because it was suggested that the evidence given by Mr. Shapowloff in an examination before the Master in Equity and tendered against him before the magistrate, established that, at the relevant time, he had not adverted to this question at all. If he had not adverted to it, he was, nevertheless, open to conviction if he "had" no reasonable or probable ground of expectation that the company would be able to pay the debt, i.e., if there was no such ground in existence objectively. If, subjectively, he had an expectation that the company would be able to pay the debt, he would still be open to conviction, if there was no such ground in existence objectively. Correspondingly, if he had subjective expectation that the company would not be able to pay the debt, I am inclined to think that the effect of the word "had" is that the fact that, unknown to him, there was a reasonable or probable ground of expectation, would not prevent his being convicted. If the proper conclusion be that what Mr. Shapowloff did was to be concerned in the company contracting the debt, not caring whether it would be able to pay it or not, he would, in my opinion, still be open to conviction, if it appeared that objectively there was no such ground of expectation. On any view of Mr. Shapowloff's subjective expectation, he was open to conviction.

It, therefore, becomes necessary to consider whether there existed the relevant expectation, or a ground of expectation, of the company being able to pay the particular debt. This, in a case such as the present, requires examination of two things: the time by reference to which the ability to pay is to be assessed, and what is meant by ability to pay.

The magistrate was satisfied that the scrip was apt not to be delivered for periods up to three months after the purchase; reference was made in argument to payment two or three months after 5th February, 1970. The expectation in question is, therefore, an expectation in respect of payment of a debt apt to fall due for payment, in whole or in separate parts, in two or three months time. The time for payment of the debt is not determinative in the sense that, if there is no ground of expectation that the debt can be paid on the date on which it will fall due for payment, but there is a reasonable ground of expectation that it will be paid on the following day, the prosecution must succeed on this aspect of the subsection. On the other hand, the fact that there is a reasonable or probable ground of expectation that the company will be able to pay the debt at a time distant from the time when the debt falls due will not normally be an answer to a prosecution. It will be necessary in each case to take into account the particular facts; I think the words "being able to pay the debt" admit of some flexibility in this regard.

Next, it is necessary to examine what is meant by ability to pay. That which is in question is not whether the company, at the relevant time, will be solvent or whether it will, on an assumed and instant liquidation, have a surplus sufficient to meet the debt, though these may be relevant in considering the statutory question. What will constitute ability to pay must be determined, in a realistic way, by reference to the facts of the particular case, after taking into consideration, inter alia, the company's assets and liabilities and the nature of them, and the nature and circumstances of the company's activities: cf. in other contexts, Lyde v. Barnard ^[F10] ; J. v. J ^[F11] The cash expected to be available at the particular time will be relevant, but not necessarily determinative. It will, for example, be relevant to consider whether the company could be expected to pay the debt by borrowing; whether, if it must realize assets to obtain the money to pay the debt, it can be expected to do this by the relevant time and at what price; and whether what it will have to do in paying and being able to pay the debt will involve the company or its officers in voidable transactions, improper preferences, or breach of obligations under the general law or relevant legislation. It would, I think, be proper, in a particular case, for account to be taken appropriately of a promise, legally binding or otherwise, to provide money or financial assistance, by loan, subscription for share capital, or (as was suggested in this case) by the provision of a guarantee.

The subsection requires that the liabilities of the company be "taken into consideration", but this does not mean on the basis of a liquidation of the company, either at the time when the transaction occurs or when the debt is to be seen as payable. If the debt be payable on one day and there is a liability which is to be met at the distant future, the matter is not to be determined simply by considering whether, on the date of the payment of the debt, the company will have the relevant capacity to pay, if it first sets aside the total amount necessary to meet the long-term liability. Depending upon the facts of the case, it may be proper to see that liability, though taken "into consideration", as having little immediate significance. On the other hand, according to the facts, a liability, though it will fall due for payment after the date on which the relevant debt is to be paid, may be seen as directly affecting the company's ability to pay the debt because, for example, payment of the debt would, in the context of the existence of the liability, involve the company in a breach of the general or the statute law.

It is, in my opinion, important to bear these matters in mind in considering whether, in his approach, the learned magistrate fell into error. The debt in question was $131,350.50. As counsel has informed the Court, the company had, on 5th February, 1970, a large credit in its bank account, and it had realisable shares, in Endurance Mining N.L., which, as the prosecution has conceded, would produce on sale through the Stock Exchange substantially more than the amount of the debt. On the face of it, there was, therefore, some basis for Mr. Shapowloff's submission that the relevant ground of expectation existed that the company would be able to pay a debt at the appropriate time. The learned judge felt that the magistrate had not embarked upon the appropriate consideration of the assets and liabilities of the company, and that he had arrived at a wrong conclusion. It is, therefore, necessary to examine what were the facts before the learned magistrate and how he directed himself to them.

It was seen as relevant to determine the financial position of the company on the day the order was placed, viz., 5th February, 1970. The parties, at least before Cantor J., approached this question in the same general way: (i) they took as the starting point a statement (exhibit Z) as to the company's financial position as at 30th June, 1969, prepared by the liquidator from the company's balance sheet; (ii) they then adjusted that position to take account of the variation in the company's position to 5th January, 1970; and (iii) they then made further adjustments to arrive at the position as at 5th February, 1970.

The balance sheet as at 30th June, 1969, showed that the company had fixed assets (plant, machinery, etc.) $43,942; investments (being shares in other companies costing $1,228,417); current assets (being shares in other companies, costing $248,131); trade debtors $142,076; cash $15,758; and an amount owing under an agreement $133,943.

Before Cantor J. and, it would appear, to some extent before the learned magistrate, the parties took the following steps:

(b)

The parties were in difference as to how four items should be dealt with:

(i)

"Amounts due under agreement": $173,913

(A)

This amount had been included at face value in the amount of $1,354,647 shown in (i) (a) (shareholders' funds at 30.6.69).

(B)

The prosecution submitted that this asset should be shown as of no significant value.

(C)

Mr. Shapowloff submitted that no adjustment should be made in respect of this amount.

(D)

The magistrate concluded that it would be "both imprudent and unreasonable for the defendant to assume that the full amount was recoverable and even if recoverable that it would be paid within a reasonable period of time".

(ii)

The value of shares held by the company in Endurance Mining N.L.

(A)

The market price of these shares had risen between 5.1.70 and 5.2.70 so that, multiplied by the number of shares held by the company, that increase was $205,000.

(B)

The prosecution submitted that the shares were "volatile shares", that if the company's holdings were all sold in a relatively short time there would be a fall in the market price, and that, therefore, the increase in value of the shares should be taken into account at $105,000.

(C)

Mr. Shapowloff submitted that the increase in value of the shares should be taken into account at $205,000.

(D)

The magistrate accepted that these were "clearly speculative shares" and that the selling of such a large holding would lead to a loss in value. He referred to the fall in value which had taken place between 30.6.69 and 5.1.70, but understated the fall substantially: he mistakenly said it was $70,000, whereas it was greatly in excess of that. The magistrate did not specify a particular sum to be taken into account in this regard.

(iii)

The result of the company's trading in Tasminex shares before the relevant order:

(A)

On 5.2.70, the company held 14,200 Tasminex shares and the nett cost of these was $988,206. The market price immediately before the relevant order was c.$25.50 per share.

(B)

The prosecution submitted that the shares were "volatile shares" and that they should be taken into account at c.$14 per share ($198,000). The nett loss on Tasminex trading was therefore $789,406.

(C)

Mr. Shapowloff submitted that the shares should be taken into account at $25.50 per share ($387,100). The nett loss on Tasminex trading was, therefore, $601,106.

(D)

The magistrate accepted the Tasminex shares were "highly volatile" and the price had risen to $90 and fallen to about $24. He did not specify any figure to be taken into account in this regard.

(iv)

The provision for income tax for the period up to 30.6.69: $370,000.

(A)

In the company's accounts as at 30.6.69 (and, therefore, in the amount of $1,354,647 shown in (i) (a) above) provision had been made for such tax in the amount of $370,000. If the provision had not been made the shareholders' funds at 30.6.69 would have been increased by that amount and the company's financial position as at 5.2.70 improved accordingly.

(B)

The prosecution submitted that that $370,000 should be seen as a liability and the amount put aside in assessing the company's financial position as at 5.2.70.

(C)

Mr. Shapowloff submitted that that sum should be seen as available to the company and the total amount should be added so as to improve the company's financial position as at 5.2.70.

(D)

The magistrate held that "some notice" should have been taken of the fact that the company "may have to provide" that sum for taxation when the relevant order was placed.

In assessing the financial position of the company as at 5th February, 1970, these four matters which, in substance, were the only matters in dispute between the parties, were of considerable importance. If the view of the prosecution in respect of each of them was accepted, and regard was then had to the liabilities of the company and the moneys that it could deprive from realising its assets, there was a balance of liabilities over moneys which would become available of approximately $283,434.

Before considering the magistrate's approach to the question posed by s. 303 (3), I shall refer shortly to what was said by Cantor J., because his Honour, in a carefully reasoned judgment, concluded that the magistrate had not properly taken into account the evidence as it related to some at least of these four matters and had, therefore, fallen into error.

As to the first of them (the amount of $173,913 due to the company under an agreement) his Honour saw no difficulty: whether the amount would ever be paid, it would not have been paid at such a time as would have helped the company pay the present debt.

As to the second matter (the shares in Endurance Mining N.L.) the difference between the parties was as to how the increase in market value between 5.1.70 and 5.2.70 should be taken into account. Cantor J. did not differ from the magistrate's general approach to the amount to be derived on sale of the shares, but he saw him as having overlooked this increase in value. Nevertheless, in assessing how the rise in the market price of these shares would be reflected in the moneys the company could obtain on sale of them, I think that he accepted that the $205,000 should be discounted by something of the order of $100,000. I shall return subsequently to this matter.

As to the third matter (the Tasminex shares), his Honour was of the view that to take $25.50 per share was inappropriate but that $14 per share was "somewhat conservative".

As to the fourth matter (the provision for income tax, $370,000), his Honour thought that it had not been shown beyond reasonable doubt "that the sum of $370,000 was unavailable".

I would, with respect, doubt whether the way in which the matter was put to the learned judge led to a proper consideration of the question posed by s. 303 The assessment of the company's financial position as at 5th February, 1970, is not determinative of the statutory question. That assessment is relevant in so far as it assists in determining whether the company would have been able to pay the debt of $131,350.50 apt to fall due some two or three months in the future. To pay that debt, it would have available, in addition to its cash balance, such amounts as it could realise from the sale, inter alia, of the Endurance and the Tasminex shares. But, in this regard, the crucial matter was the indebtedness of the company in respect of its purchase of Tasminex shares over the weeks preceding 5th February, 1970. Accepting that the Tasminex shares so purchased had not been paid for, there would then be falling due for payment from time to time the respective prices of those shares. Presumably, those debts would fall due for payment before the debts for purchase of the shares the subject of the relevant order. The amount to be paid for the Tasminex shares was $988,206. Unless the company could realise the Tasminex shares held by it, it would have exhausted all of its other available assets before that amount was paid. Even if it realised the Tasminex shares, there would, depending upon whether the average price obtained on realisation was $14 or $25.50 per share, an amount which the company would have to provide from its other assets, in addition to what was realised from the sale of the Tasminex shares, would vary between $601,106 and $789,406. Therefore, if it be assumed that payment for the Tasminex shares purchased before and on 5th February, 1970, would fall due generally in the order in which the purchases were made, the question would be whether, when the company was called upon to pay for the relevant order, it would, even assuming full realisation of its assets, have moneys available to pay the debt.

It is in this regard that the provision for income tax of $370,000 assumes importance. Even if the calculations of the prosecution be otherwise accepted, if no provision be made against the possibility of the company becoming liable to pay this $370,000, the company would have a surplus of realisations over liabilities of $86,566. If the prosecution's calculations be qualified by, e.g., assuming a higher price on realisation of the Tasminex or Endurance shares, the surplus would be greater.

Cantor J. saw this as being of significance, and conclusive in Mr. Shapowloff's favour.

I think that, as far as they related to the $370,000, the submissions of the prosecution were wrong. As I have said, the question is not whether an amount of this order should be set and kept apart from the other assets available to the company for, inter alia, payment of the subject debt. If the magistrate had approached the matter on that basis, his approach would, in my opinion, have been wrong in principle. The proper approach was to look, inter alia, to two things: when, if it did accrue, the tax liability would accrue; and whether, in the light of the answer to that question, there would be some reason, e.g., a breach of their obligations by the company or its officers, why the subject debt should not be paid without first putting aside out of the company's available funds some or all of the amount of that liability.

I do not think it would have been open to the magistrate to conclude that it would not have been open to the company to pay the subject debt when it fell due without putting aside $370,000 or the substantial part of it. Viewed as at 5th February, 1970, Mr. Shapowloff could, in my opinion, have expected that the company, in raising money to provide for that and other debts in respect of the Tasminex shares, would recognize that the possibility of an assessment to income tax would be a factor affecting its financial position; but he could have expected that that possibility would not mean that the company would have to withhold from use in the payment of those debts any large sum.

It follows, therefore, that the magistrate was required to approach the statutory question upon the basis that, on the prosecution's evidence, it was quite possible that a liquidation of the kind proposed would result in a surplus being available after the discharging of all liabilities (other than for relevant income tax) and the payment of the subject debt.

But this does not mean that the prosecution must necessarily fail. The language of the section, no doubt, derives from the bankruptcy legislation: cf. the Bankruptcy Act, 1914 (Imp.) , s. 26 (3) (d) and the Bankruptcy Act 1966 (Cth.) , s. 265 Whatever meaning be given to "expectation" it goes beyond a mere hope or possibility. It requires, in a sense, a prediction as to the future ability of the company, and the measure of the reliability of that prediction is in the words "reasonable or probable". Where the company's ability is seen as affected by a number of contingencies, it will be proper in determining whether, in a particular case, that prediction has the necessary degree of reliability to take into account the margin available to accommodate matters such as an unfavourable outcome of contingencies and costs which have been unprovided for. It may, in the particular case, be open to the court to conclude that an officer considering whether, at the relevant date, the company would be able to pay the subject debt, should see the contingencies such that an expectation that it would be able to do so would have no reasonable or probable ground.

I come now to consider whether the magistrate misdirected himself or otherwise erred in considering the statutory question. I have considered the criticisms of the magistrate's reasoning which have been made by Cantor J. and the matters to which Mr. Handley Q.C., though appearing for the informant, has fairly placed before this Court for consideration. Though the judgment is not explicit upon a number of points, I do not think that it discloses such an error in approach or other such errors as are relevant for present purposes.

The approach adopted by the magistrate was this. He pointed out that the company held Tasimex shares which had cost $1,150,517.59 and that the delivery of scrip (and, therefore, the time for payment) would be delayed for periods up to three months. The price of Tasminex shares had fluctuated from $90 to $24; they were "highly volatile". I infer his Worship had in mind that the price might fall further. He then looked to what Mr. Shapowloff himself had said as to his expectation. He noted that he had said "he had just a vague overall idea of what the situation was" and that "at about the relevant time, he did not really look at the situation to see how you were going to pay for the Tasminex shares you were ordering". He then set forth the following questions and answers: "Q. Did you as a director give any consideration as to how you were going to pay for these? Take the early part of February at which time you owed $900,000 did you ever discuss how they were to be paid for? A. Well, we were holding an enormous parcel of Endurance and other stocks, were we not? Q. An enormous parcel of Endurance, did you say? A. Whatever it was 700,000 odd."

This led the magistrate to consider "the evidence surrounding the assets and liabilities of Stirling Henry Limited as at 5th February, 1970". His Worship first considered the Endurance shares and, I think, clearly directed his attention to what might be expected from the realisation of them. Two criticisms were directed to what he did in this regard. He admittedly was mistaken when he said that the 1969 balance sheet showed a provision of $70,000 for the fall in value of the Endurance shares: that provision related to other shares. But the fact was that the fall in value of the Endurance shares against the cost shown in the balance sheet, at least as at 5th January, 1970, was substantially in excess of $70,000. It was also pointed out by Cantor J. that the magistrate did not refer to the rise in value of these shares between 5th January, 1970, and 5th February, 1970, but I do not think that it is to be inferred from this that his Worship omitted to consider this fact. He had pointed out, in his judgment, that a loss was to be expected on realisation of the shares, and his purpose in referring to the $70,000 in the balance sheet was to indicate why he felt that the fact that such a loss would take place "would be known to the defendant".

His Worship then, having referred to the profit for the 1969 year, and the amount of the company's current assets, dealt with two matters which he concluded were known to the defendant and "would weaken the financial position of Stirling Henry Limited". First, he referred to the $370,000 provided for income tax. He concluded merely that the defendant "should have, as any reasonable man, taken some notice of the fact that the company may have to provide the sum of $370,000 for taxation when the large amount of shares were contracted for in Tasminex".

His Worship did not indicate what, or in what manner, "notice" of this should be taken. I have been troubled as to whether his Worship misdirected himself in this regard. I have indicated my view as to how, in this case, the possibility that the company would be liable to tax in this regard should have been taken into account. His Worship appears to have inclined to the view that tax would have been payable. The time at which the tax, if payable, would have fallen due for payment was of significance. The amount was also of significance in that, as I have said, even on the prosecution's calculations it could, if taken into account properly, lead to a surplus being available after full realisation of the company's assets. The possibility of such a surplus, as a margin against the unfavourable outcome of contingencies and the like, would, of course, require to be weighed in the balance with all other factors, e.g., the fact that the financial position of the company had been calculated on the assumption that its fixed assets could be realised at their depreciated cost, and the possibility that the prices of the company's speculative shares would fall drastically; but the judgment does not in terms indicate that the magistrate followed this or any other acceptable process of reasoning in relation to this item.

In the end, I do not think that it should be inferred that the reasoning his Worship followed in this regard was wrong. What he said, as to taking "some notice" that such a sum might have to be paid, was consistent with a correct approach having been adopted, and I do not think that the contrary should be inferred.

But, in addition, what his Worship said as to this amount should be understood in the light of his general approach to this aspect of the matter. In considering whether Mr. Shapowloff had the relevant ground of expectation of the company being able to pay, I think he concluded that he had given little or no thought to whether the company would be able to pay for the Tasminex shares that he, on its behalf, had been ordering. He referred to evidence given by Mr. Shapowloff before the Master in Equity apt to show this. He quoted an answer in which Mr. Shapowloff suggested that the Endurance and other shares could be sold to pay for the Tasminex shares and then dealt with the Endurance shares in a manner which, I think, indicated that he was not convinced that there was in that explanation any appropriate ground of expectation available to Mr. Shapowloff. Following this, he referred to the fact that the company's return made up to 28th January, 1970, showed the company's "current assets were $509,898", and said: "Is it a coincidence then that from about the time the defendant certified the annual return as at 28th January, 1970, that approximately one million and a half dollars in shares in Tasminex were contracted for within 11 days and from a position of being short sold? Specially as the evidence discloses that these were contracted for principally under the authority of the defendant." It was following this that his Worship went on to deal with the tax provision of $370,000 as being a further matter which "could weaken the financial position of" the company. I think his Worship saw the financial position of the company at the relevant time as having been such as confirmed the view that Mr. Shapowloff gave no real consideration to, and "had" no expectation concerning, the company's ability to pay the subject debt.

His Worship then dealt with the debt of $131,350. His approach was admittedly correct.

One other matter may be mentioned. His Worship did not consider in detail the process of realisation of the Tasminex shares or the financial result to be obtained from it. This, of course, was a matter relevant in determining what the company's ability to pay would be at the end of the relevant two or three months period. But his Worship did, at the end of his judgment say: "I feel that the orders made on 5th February, 1970 must be looked at with all those orders for shares in Tasminex made from 27th January, 1970 to 4th February, 1970. Those orders, within the defendant's knowledge, were still unpaid for and amounted to a sum of approximately $1,000,000."

His Worship, I think, took into account that payment for those shares would have to be made during the relevant period, and I do not think that it is to be inferred that in this regard, he adopted a wrong approach.

In my opinion, therefore, there was no relevant error in his Worship's judgment.

As to (d):

The penalty imposed was admittedly in excess of that provided for by the section. It has been accepted, before Cantor J. and, as I understand it, before this Court, that this is an error appropriate to be corrected under the Justices Act.

As to (2): The effect of s. 112 of the Justices Act:

The remedy chosen by Mr. Shapowloff provides only for a limited review of the magistrate's decision. The relevant authorities have recently been dealt with in this Court in Hooper v. Gorman ^[F12] In Williams v. Hobday ^[F13] , Dixon C.J. said that "if a fundamental error in law amounting to a misdirection is made by the magistrates in such circumstances as to lead to their failure to determine what are in truth the relevant facts", then the section will apply. The unsatisfactory nature of this form of review has been referred to in the past, and to those observations I have added my own: Hooper v. Gorman ^[F14] This is another case in which time has been spent in considering, not merely whether the order made was wrong, or wrong in law, but whether the nature of the error was apt for this remedy.

Upon the basis of the analysis which I have adopted, I am not satisfied that, if his Worship's judgment was in error in any respect, the error was such as to lead to a relevant misdirection or otherwise to warrant review under this part of the Justices Act .

I agree with the orders proposed by Reynolds J. A.

Appeal allowed with costs. Order of Cantor J. set aside. In lieu thereof, order that summons be dismissed with no order as to costs. Conviction before magistrate confirmed, but fine reduced to $200. Respondent to have certificate under Suitors' Fund Act, 1951.

Solicitor for the appellant (defendant, informant): J. M. Swan

(Corporate Affairs Commission).